Ex-Feinstein treasurer gets prison term

FEDERAL COURT

Updated 10:24 pm, Wednesday, November 28, 2012

Kinde Durkee leaves the federal courthouse in Sacramento, where she was sentenced to 8 years in prison for mail fraud.

Kinde Durkee leaves the federal courthouse in Sacramento, where she was sentenced to 8 years in prison for mail fraud.

Photo: Rich Pedroncelli, Associated Press

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U.S. Attorney Benjamin Wagner talks to reporters about the sentencing of former Democratic campaign treasurer Kinde Durkee, outside the federal courthouse in Sacramento, Calif., Wednesday, Nov. 28, 2012. Durkee who pleaded guilty to five counts of mail fraud in March, was sentenced to a total of 97 months in federal prison and was ordered to pay $10.5 million in restitution for tampering with the electoral process. Kindee, who defrauded high-profile clients such as U.S. Sen. Dianne Feinstein, is scheduled to surrender to U.S. Marshals in Los Angeles on Jan. 2 She remains free on $200,000 bond. less

U.S. Attorney Benjamin Wagner talks to reporters about the sentencing of former Democratic campaign treasurer Kinde Durkee, outside the federal courthouse in Sacramento, Calif., Wednesday, Nov. 28, 2012. ... more

Photo: Rich Pedroncelli, Associated Press

Ex-Feinstein treasurer gets prison term

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Sacramento --

What started as an attempt to keep a struggling business afloat a decade ago turned into the largest embezzlement of political funds in California history, ending Wednesday with an eight-year federal prison sentence for a former campaign treasurer who stole from some of the state's most powerful politicians.

Kinde Durkee received the sentence in federal court nearly eight months after she pleaded guilty to five counts of mail fraud in connection with the scheme whose victims included Sen. Dianne Feinstein, along with other members of Congress and the Legislature.

The sentence was on the low end of the possible range of punishment - Durkee faced a maximum of 20 years for each count. She was also ordered to pay $10.5 million in restitution to her victims, who are unlikely to see much of the money because Durkee already spent it and has few other resources.

Judge Kimberly Mueller of the U.S. District Court in Sacramento called the embezzlement a "significant and egregious offense."

"I think the violation of trust ... can't be understated," Mueller said before sentencing Durkee.

Durkee, 59, who had been out on bail, offered an apology.

"I take full and complete responsibility for what I have done," Durkee told the judge, her voice breaking slightly. She was ordered to surrender to law enforcement Jan. 2.

Both prosecutors and her defense attorney said Durkee didn't use the money to fund a lavish lifestyle, but instead spent it to cover losses in her business and on mostly mundane personal expenses like her mortgage and health care for her parents.

"Ms. Durkee was involved with a business that could not support itself and, as a result, she availed herself of her clients' funds to operate the business," her attorney, Daniel Nixon, told reporters after the sentencing. "This was an organization that had real problems. There were issues with collections. There were issues with billing. There were lots of issues. It was just a very dysfunctional organization."

But this was not a case simply of bad bookkeeping, said Benjamin Wagner, U.S. attorney for the eastern district of California. He said Durkee lied repeatedly over the years to her clients and to state and federal elections officials, and that her deception was "very deliberate."

He said there were 77 victims, and the amounts stolen ranged from $499 from one organization to $4.5 million from Feinstein's campaign committee.

"I think probably when this all started back around 2002, she probably wasn't setting out to embezzle $10 million," Wagner said. "But I think that over time she was in control of a lot of accounts, her clients trusted her, unfortunately, with their money and she was able to get away with it for years. I think it just slowly built up into a huge amount."

He said that Durkee had spent the money, and that investigators hadn't found any hidden slush funds. She did spend part of the stolen cash on clothes and entertainment, including for Los Angeles Dodgers tickets and at Disneyland, prosecutors said.

Durkee was ordered to turn over funds in a 401(k) worth about $90,000 and the Burbank office building that housed her firm will be auctioned Friday, with any profit going to victims.

As a campaign treasurer, Durkee's job was to oversee the depositing of campaign contributions into accounts and make the appropriate filings with state and federal elections commissions. She controlled nearly 400 accounts, and her clients were almost entirely affiliated with the Democratic Party.

Her firm, Durkee and Associates, charged less for its services than other such businesses in the state, but Wagner said, "I think she was making up the money through ill-gotten gains."

During the hearing, Durkee's attorney, Nixon, alluded to an unspecified psychological issue "underpinning this theft." He said Durkee had "a lot of things happen to her" that led to bad decisions.

Afterward, he declined to elaborate, saying only, "She's a very kindhearted person who sometimes substituted the needs of others in place of herself."

Durkee had worked at the business for several decades under its previous owner, and when he died she reluctantly took it over, according to a court filing made by her attorney earlier in the week. Before taking over, she would cover for other employees who made errors that resulted in fines and would pay them herself, unbeknownst to her supervisor, according to the filing.

Once in charge, the defense said, the many problems plaguing the firm remained, and Durkee could not bring herself to confront or fire incompetent employees.

The embezzlement was finally discovered by a staffer at the Fair Political Practices Commission, who contacted law enforcement after finding that Durkee had moved money among various accounts without candidates' knowledge. The FBI arrested her in September 2011.

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